View Full Version : Are those cost methods still relevant under current law?
03-04-2008, 07:21 AM
Section 8 is about different cost methods. Given the new regulation in US (PPA06), are those cost methods still relevant?
For the test's perspective, is SOA expect us to relate to the New law and any updates from IRS?
03-04-2008, 08:08 AM
US Regulations provide an absolute minimum required contribution and a mxamimum tax deductible contribution. The desicion on how much to contribute between those two boundaries (and the top is actually a soft, not hard boundary) is up to the client. It is certainly reasonable that you could still be using any number of cost methods to determine a recommended contribution between those two boundaries.
From the tests perspective, the syllabus states we will not be tested on information covered by the EA exams, which is presumably the details of US law and calculations. As far as I know cost methods are still tested on the EA exams also. My interpretation is that we should know both (law and cost methods) in general, i.e. the purpose of the law (at least to the extent it might be mentioned in any readings) and the usefulness of the various cost methods (particiularly since those are discussed). I don't expect to be required to perform any specific calculations such as computing an aggregate NC or the minimum req'd contribution under US law. I might expect to see a question that requires us to recommend a specific cost method based on plan design and the ER's funding goals.
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